6-K 1 v326953_6k.htm FORM 6-K

 

 

Ecopetrol announces its results for the third quarter and the

nine-month period ended September 30, 2012

 

·The consolidated average production (Ecopetrol S.A. including interests in affiliates and subsidiaries) in the third quarter of 2012 increased by 1.6% compared to the same quarter of 2011.
·Ecopetrol S.A.’s net income for the third quarter was COP$3,247.5 billion, equivalent to COP$78.99 per share.
·Revenues, operating income, EBITDA and net income of Ecopetrol S.A. in the nine-month period ended September 30, 2012, increased by 10.0%, 3.7%, 4.1% and 2.3%, respectively, compared to the first nine months of 2011.

 

Ecopetrol S.A. (BVC: ECOPETROL; NYSE: EC; TSX: ECP) announced today its unaudited financial results, both consolidated and unconsolidated, for the third quarter and first nine months of 2012, prepared and filed in Colombian pesos (COP$) in accordance with the Public Accountancy Legal Framework (Regimen de Contabilidad Publica, RCP) of Colombia’s General Accounting Office.

 

Some figures in this report are presented in U.S. dollars (US$) where indicated. The tables shown in the body of this report have been rounded to one digit. Figures presented in COP$ billion are equivalent to COP$ one thousand million.

 

Ecopetrol S.A. Financial Results Highlights

 

Unconsolidated
(COP$ Billion)  3Q 2012 *   3Q 2011 *   Var. %   Jan-Sep 2012*   Jan-Sep 2011*   Var % 
Total sales   14,228.7    14,133.4    0.7%   44,470.3    40,438.2    10.0%
Operating profit   4,913.0    6,273.5    (21.7)%   17,818.6    17,176.3    3.7%
Net Income   3,247.5    4,196.7    (22.6)%   11,266.2    11,015.7    2.3%
Earnings per share (COP$)   78.99    103.68    (23.8)%   274.00    272.16    0.7%
EBITDA   6,231.7    7,157.9    (12.9)%   21,407.6    20,565.0    4.1%
EBITDA Margin   44%   51%        48%   51%     

 

Consolidated
(COP$ Billion)  3Q 2012 *   3Q 2011 *   Var. %   Jan-Sep 2012*   Jan-Sep 2011*   Var. % 
Total sales   16,556.7    16,360.3    1.2%   51,093.8    47,049.9    8.6%
Operating profit   5,551.3    6,689.1    (17.0)%   19,250.3    18,445.8    4.4%
Net Income   3,227.3    4,153.0    (22.3)%   11,158.2    11,014.5    1.3%
EBITDA   6,914.6    7,693.3    (10.1)%   23,150.1    22,218.4    4.2%
EBITDA Margin   42%   47%        45%   47%     

 

* Not audited, for illustration purposes only

  

 
 

 

 

In the opinion of Ecopetrol S.A.’s CEO, Javier Gutierrez:

 

“2012 has been a year in which Ecopetrol and its affiliates and subsidiaries have maintained their rate of growth despite facing challenges specific to the current industrial environment and our country. The company has made steady progress quarter after quarter in reaching the goals of our investment plan for 2020.

 

Among the important accomplishments for this quarter, I would like to highlight the three hydrocarbon discoveries, including one discovery in the Gulf of Mexico, higher production by our affiliates Equion and Savia, the signing of a long-term agreement for the export of heavy crude to India, the improved credit rating profile by Standard & Poors, Ecopetrol’s inclusion for a second consecutive year in the Dow Jones Sustainability World Index, the three technology patents awarded and the continued improvements in the HSE accident indexes.

 

We believe these accomplishments demonstrate that we are able to adapt to the environment. Our achievements in the quarter, as well as the belief that our operation is strong, give us the confidence we need to continue reporting good results for our nearly 500,000 shareholders.”

 

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Ecopetrol announces its results for the third quarter and the

nine-month period ended September 30, 2012

 

Table of contents

 

I. Financial and operating results 4
a. Availability of crude and products 4
b. Ecopetrol S.A. sales volume 5
c. Crude and product prices 6
d. Financial results 7
e. Ecopetrol S.A. cash flow 8
f. Ecopetrol S.A. segment results 9
g. Ecopetrol S.A. balance sheet 10
h. Credit rating 10
II. Consolidated financial results1 11
III. Business aspects 13
a. Investment plan 13
b. Exploration 13
c. Production 15
d. Refining 16
e. Transportation 18
f. Biofuels 19
IV. Organizational consolidation, social corporate responsibility and corporate government 20
a. Organizational consolidation 20
b. Corporate responsibility 20
V. Conference calls 21
VI. Exhibits: Ecopetrol S.A. 22
VII. Exhibits: Subsidiaries results 28

 

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I. Financial and operating results

 

a.Availability of crude and products

 

The availability of Ecopetrol S.A. crude and products is summarized in the following produced and purchased volumes:

 

Ecopetrol S.A. (unconsolidated)

 

Gross oil and gas production                    
(MBOED)  3Q 2012   3Q 2011   ∆ (%)   Jan-Sep 2012   Jan-Sep 2011   ∆ (%) 
Crude Oil   583.6    575.2    1.5%   586.7    563.5    4.1%
Natural Gas   108.7    102.3    6.3%   110.1    99.3    10.9%
Total   692.3    677.5    2.2%   696.8    662.8    5.1%

 

(-) Royalties                        
(MBOED)  3Q 2012   3Q 2011   ∆ (%)   Jan-Sep 2012   Jan-Sep 2011   ∆ (%) 
Crude Oil   87.8    87.5    0.3%   87.8    86.4    1.6%
Natural Gas   21.2    22.2    (4.5)%   21.4    21.1    1.4%
Total   109.0    109.7    (0.6)%   109.2    107.5    1.6%

 

(=) Net oil and gas production                        
(MBOED)  3Q 2012   3Q 2011   ∆ (%)   Jan-Sep 2012   Jan-Sep 2011   ∆ (%) 
Crudo   495.8    487.7    1.7%   498.9    477.1    4.6%
Gas natural   87.5    80.1    9.2%   88.7    78.2    13.4%
Total   583.3    567.8    2.7%   587.6    555.3    5.8%

 

Local Purchase volume (MBOED)*  3Q 2012   3Q 2011   ∆ (%)   Jan-Sep 2012   Jan-Sep 2011   ∆ (%) 
Crude Oil   201.4    190.8    5.6%   198.3    185.0    7.2%
Products   9.6    7.5    28.0%   10.1    6.7    50.7%
Natural Gas   12.8    40.2    (68.2)%   22.5    37.5    (40.0)%
Total   223.8    238.5    (6.2)%   230.9    229.2    0.7%

 

Imports volume (MBD)  3Q 2012   3Q 2011   ∆ (%)   Jan-Sep 2012   Jan-Sep 2011   ∆ (%) 
Products   79.6    80.3    (0.9)%   91.8    74.3    23.6%

 

* Purchased volume includes royalties from Ecopetrol and other companies

 

The following are highlights of the third quarter:

 

·Increased purchases of crude: larger purchases of royalties and crude oil diluents from other producers due to Colombia´s higher production.

 

·Increased purchases of refined products: purchases of more jet fuel from Reficar S.A. in order to meet the increased Colombian demand in 2012 which rose 9.8%, and of naptha diluent given the higher production of heavy crude.

 

·Decreased purchases of gas: starting January 2012, some gas producers signed commercialization agreements to sell royalties (Decree 2100 of 2011), reducing the availability.

 

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b.Ecopetrol S.A. sales volume

 

The following is a summary of sales volume:

 

Ecopetrol S.A. (unconsolidated)

Sales volume

 

Local sales volume (MBOED)  3Q 2012   3Q 2011   ∆ (%)   Jan-Sep 2012   Jan-Sep 2011   ∆ (%) 
Crude Oil   11.9    5.1    133.3%   10.1    3.8    165.8%
Natural Gas   52.7    71.3    (26.1)%   57.9    70.7    (18.1)%
Gasoline   63.1    63.5    (0.6)%   66.4    65.1    2.0%
Medium Distillates   115.1    110.5    4.2%   112.1    108.2    3.6%
LPG and propane   14.5    17.5    (17.1)%   15.5    16.4    (5.5)%
Fuel oil   2.1    0.5    320.0%   2.0    0.6    233.3%
Industrial and Petrochemical   13.8    13.9    (0.7)%   13.9    15.6    (10.9)%
Total Local Sales   273.2    282.3    (3.2)%   277.9    280.4    (0.9)%

 

Export sales volume (MBOED)  3Q 2012   3Q 2011   ∆ (%)   Jan-Sep 2012   Jan-Sep 2011   ∆ (%) 
Crude Oil   425.7    429.3    (0.8)%   441.1    400.0    10.3%
Products   53.6    55.8    (3.9)%   53.0    55.8    (5.0)%
Natural Gas   15.8    28.2    (44.0)%   23.8    24.4    (2.5)%
Total Export Sales   495.1    513.3    (3.5)%   517.9    480.2    7.9%

 

Sales to free trade zone (MBOED)  3Q 2012   3Q 2011   ∆ (%)   Jan-Sep 2012   Jan-Sep 2011   ∆ (%) 
Crude Oil   70.3    74.1    (5.1)%   70.2    76.1    (7.8)%
Products   2.9    1.0    190.0%   3.0    1.9    57.9%
Natural Gas   6.0    2.2    172.7%   4.7    2.4    95.8%
Total sales to free trade zone   79.2    77.3    2.5%   77.9    80.4    (3.1)%
                               
Total sales volume   847.5    872.9    (2.9)%   873.7    841.0    3.9%

 

International market (58% of the third quarter of 2012 sales, 68% including sales to Free Trade Zone: Reficar S.A. and Celsia):

 

The reduction in volume exported by Ecopetrol was primarily the result of:

 

·Natural gas:

 

oLower availability of Guajira gas, which has been used to meet Colombia’s high thermal demand.

oLower sales volume in accordance with Decree 2100 of 2011 (explained on page # 4).

 

·Crude: Decreased availability of Castilla, South Blend and Caño Limón mainly due to delays in approval of environmental licenses and constraints in transportation systems.

 

The following is a summary of the main destinations of crude and product exports (does not include exports of natural gas to Venezuela). Highlights include the increase in crude sales to the United States and Far East, and of products to the Caribbean and Far East.

 

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Export destinations - Crudes
Destination  3Q12   3Q11   Jan-Sep2012   Jan-Sep2011 
U.S. Gulf Coast   42.9%   68.1%   47.4%   48.6%
Far East   14.3%   6.5%   16.1%   15.5%
Central America   10.3%   3.3%   2.5%   5.5%
U.S. West Coast   7.7%   4.8%   9.0%   8.6%
Europe   7.4%   8.5%   3.4%   7.4%
Other U.S.   5.3%   0.6%   0.9%   2.1%
U.S. Atlantic Coast   3.9%   3.9%   2.8%   3.4%
Caribbean   3.2%   4.3%   9.4%   3.3%
Africa   2.3%   0.0%   0.5%   0.8%
South America   1.5%   0.0%   6.8%   4.0%
Canada   1.2%   0.0%   1.2%   0.8%
    100.0%   100.0%   100.0%   100.0%

 

Export destinations - Products
Destination  3Q12   3Q11   Jan-Sep2012   Jan-Sep2011 
Caribbean   43.4%   42.4%   37.9%   35.1%
Far East   17.1%   7.6%   15.4%   4.0%
U.S. Atlantic Coast   11.2%   7.7%   10.3%   12.3%
Central America   9.5%   12.0%   8.3%   15.0%
U.S. West Coast   5.8%   0.0%   2.3%   0.4%
U.S. Gulf Coast   5.1%   12.4%   12.4%   18.5%
Africa   4.5%   2.4%   5.0%   0.8%
South America   2.0%   3.9%   1.6%   4.6%
Other U.S.   1.4%   9.7%   6.8%   7.0%
Europe   0.0%   1.9%   0.0%   2.2%
    100.0%   100.0%   100.0%   100.0%

 

Colombian Market (42% of third quarter sales, 32% excluding sales to Free Trade Zone: Reficar S.A. and Celsia):

 

The decrease in local sales volume in the third quarter of 2012 was primarily the net result of:

 

1)Lower sales volume of the following products:

 

·Natural gas: Ecopetrol no longer sold royalties from other producers’ fields (as explained in pg. 4).

 

·Petrochemicals and industrial products: asphalt sales fell as demand for the product decreased because of a slowdown in paving operations in Colombia.

 

2)Higher local sales volume of the following products:

 

·Crude oil: higher demand for blends in the marine fuel market.

 

·Medium distillates: increase in demand caused by the Colombia’s higher economic growth:

 

oDiesel fuel: growth in the mining industry

 

oJet fuel: increase in flight frequencies

 

·Fuel oil: higher volumes produced and available for sale.

 

c.Crude and product prices

 

Prices  3Q 2012   3Q 2011   ∆ (%)   Jan-Sep 2012   Jan-Sep 2011   ∆ (%) 
WTI (average) (US$/Bl)   92.2    89.8    2.7%   96.2    95.5    0.7%
Brent (average) (US$/Bl)   109.4    112.2    (2.5)%   112.2    111.6    0.5%
Export crude oil basket (US$/Bl)   101.4    96.3    5.3%   104.7    96.6    8.4%
Crudes sold to free trade zone* (US$/Bl)   106.7    107.4    (0.7)%   108.9    104.3    4.4%
Export products basket (US$/Bl)   96.2    98.8    (2.6)%   99.8    95.9    4.1%
Products sold to free trade zone* (US$/Bl)   52.2    97.0    (46.2)%   71.5    111.9    (36.1)%
Natural gas basket (US$/MMBTU)   6.0    5.3    13.2%   5.8    4.7    23.4%
Gas sold to free trade zone* (US$/MMBTU)   5.7    5.3    7.5%   5.6    4.5    24.4%

* Free trade zone = Reficar S.A.

 

Crude oil:

 

During the third quarter of 2012, the export basket price rose in comparison with the same period last year mainly because of higher crude prices of Castilla, Magdalena and Vasconia.

 

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During the third quarter of the year, the export basket of Ecopetrol crude was indexed to Brent (72%), Maya (24%), Platts No. 6 of 3% USGC (1%) and other (3%).

 

Products:

 

Product sales prices to Free Trade Zones declined as a result of the lower propylene price, which was caused by reduced demand for derivatives of this product.

 

d.Financial results

 

Unconsolidated Income Statement 
(COP$ Billion)  3Q 2012 *   3Q 2011 *   ∆ (%)   Jan-Sep 2012*   Jan-Sep 2011*   ∆ (%) 
Local Sales   4,395.5    4,480.6    (1.9)%   13,622.5    13,066.6    4.3%
Export Sales   8,094.8    7,933.9    2.0%   25,690.6    22,208.8    15.7%
Sales to free trade zone   1,297.3    1,339.8    (3.2)%   3,940.3    4,082.9    (3.5)%
Sales of services   441.1    379.1    16.4%   1,216.9    1,079.9    12.7%
Total Sales   14,228.7    14,133.4    0.7%   44,470.3    40,438.2    10.0%
Variable Costs   6,654.0    5,651.1    17.7%   19,576.6    16,816.6    16.4%
Fixed Costs   2,111.3    1,636.9    29.0%   5,463.3    4,533.9    20.5%
Cost of Sales   8,765.3    7,288.0    20.3%   25,039.9    21,350.5    17.3%
Gross profit   5,463.4    6,845.4    (20.2)%   19,430.4    19,087.7    1.8%
Operating Expenses   550.4    571.9    (3.8)%   1,611.8    1,911.4    (15.7)%
Operating Profit   4,913.0    6,273.5    (21.7)%   17,818.6    17,176.3    3.7%
Non Operating Loss   (204.4)   (14.2)   1,339.4%   (1,164.4)   (844.6)   37.9%
Income tax   1,461.1    2,062.6    (29.2)%   5,388.0    5,316.0    1.4%
Net Income   3,247.5    4,196.7    (22.6)%   11,266.2    11,015.7    2.3%
                               
Earnings per share (COP$)   78.99    103.68    (23.8)%   274.00    272.2    0.7%
EBITDA   6,231.7    7,157.9    (12.9)%   21,407.6    20,565.0    4.1%
EBITDA Margin   44%   51%        48%   51%     

 

* Not audited, for illustration purposes only

 

Explanations for the main variations are the following:

 

Operating revenue for the third quarter of 2012 increased 1% compared to the same period of 2011, led primarily by a 5.3% increase in crude export prices, offset by a 3.5% decline in export volume and a 3.2% decrease in Colombian sales volume. The lower volumes were due to 1) production constraints mainly in July and August of 2012, and 2) delays in approval of environmental licenses.

 

Cost of sales in the third quarter of 2012 increased by 20.3% compared to the same quarter of 2011, due primarily to a 29% reduction in fixed costs, as a result of: 1) increased maintenance in wells and transport infrastructure, as well as maintenance in the Barrancabermeja refinery (COP$147 billion); 2) higher use of materials (COP$39 billion); and 3) non-capitalized project expenses (COP$73 billion). The increase in utilizations of contracted services (COP$131 billion) came from an increased subsoil activity, field support for new wells (Piedemonte), water management volumes and an increase in BSW (base sediment and water) mainly in the Rubiales and Quifa fields.

 

Variable cost rose 17.7% in the quarter particularly due to the “one time” reversal on the amortizable petroleum investment charge in the Chichimene field in the third quarter of 2011, amounting to COP$ 618 billion (lower costs of COP$ 410 billion and higher non financial revenues of COP$ 208 billion) which did not affect any other quarter results.

 

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Besides the accounting adjustment, the variations in variable costs are explained by: 1) higher price of purchased hydrocarbons (COP$315 billion), and 2) higher average cost of volume sold in the quarter (COP$417 billion) when adding transportation expenses in the cost allocation process.

 

Operating expenses fell 3.8% as compared to the same period of 2011, due primarily to the reduction in exploratory and project expenses (fewer dry wells and lower seismic study costs in the third quarter of 2012).

 

Operating margin in the third quarter of 2012 was 34.5% compared to 44.4% in the same period of 2011. If the “reversal” of the amortizable petroleum investment charge in the Chichimene had not taken place, the margin of the third quarter of 2011 would have been 41.5%.

 

The higher non-operating loss is explained primarily by 1) provisions from possible additional charges from self-generation and transmission of electric power in the partnership contracts of Cusiana, Cupiagua and Cravo Norte; and 2) lower exchange rate difference loss of COP$ 21 billion (revaluation of the Colombian peso vs. the U.S. dollar).

 

The following exhibit summarizes the segment net income of companies where Ecopetrol holds interest and whose profit/loss is accounted according to the equity method.

 

Equity Method: Net income per segment

(COP$ billion)

   3Q 2012   3Q 2011   Jan-Sep 2012   Jan-Sep 2011 
Exploration and Production   141.2    22.3    495.1    371.9 
Refining   9.1    31.4    (30.6)   48.9 
Transportation   131.8    72.8    180.8    95.4 
Corporate   29.1    7.9    76.4    57.0 
Total   311.2    134.4    721.8    573.2 

 

The decrease in the income tax provision in 2012 compared to the same quarter of 2011 was mainly the result of a 24.8% reduction in pre-tax earnings.

 

The lower volumes sold and the increase in costs were the drivers of a 22.6% decline in Ecopetrol’s net income compared to the second quarter of 2011. If the “one time” adjustment on the amortizable petroleum investment charge in the Chichimene field in the third quarter of 2011 had not taken place, the variation of the net income would had been minus 9.3%.

 

EBITDA in the third quarter of 2012 was COP$6,231 billion, equivalent to an EBITDA margin of 43.8%.

 

e.Ecopetrol S.A. cash flow

 

COP$ Billion  3Q 2012   3Q 2011   Jan-Sep 2012   Jan-Sep 2011 
Initial Cash   9,272.4    7,917.0    9,238.0    5,479.0 
Cash generated from operations (+)   13,948.1    13,268.0    45,294.9    38,002.0 
Cash used in operations (-)   (8,101.5)   (9,219.0)   (31,600.6)   (24,420.0)
Capex (-)   (2,485.4)   (2,549.0)   (5,689.3)   (7,182.0)
Acquisitions (-)   -    -    -    (769.0)
Dividend payments (-)   (3,500.0)   (1,943.0)   (8,419.3)   (3,926.0)
Equity offering (+)   3.0    235.0    169.8    235.0 
New debt (+)   -    -    -    - 
Other inflows (+/-)   193.7    236.0    1,110.3    822.0 
Fx differences (+)   36.9    163.1    (736.7)   (132.9)
Final Cash   9,367.1    8,108.1    9,367.1    8,108.1 

 

*For reporting purposes, balances in dollars are converted monthly to pesos at the average exchange rate. The initial cash position for each quarter is calculated based on the average rate for the first month and the final position is calculated based on the average rate for the last month of the respective quarter. .

 

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As of September 30, 2012, Ecopetrol´s balance of cash and portfolio investments amounted to COP$9,367.1 billion (46% denominated in U.S. dollars). Of the outstanding balance, COP$ 2.56 trillion are earmarked to the payment of the third installment of the ordinary dividend, and COP$ 1.34 trillion to the payment of the extraordinary dividend of the Government during the fourth quarter of this year.

 

f.Ecopetrol S.A. segment results

  

Quarterly Results by Segment
 
COP$ Billion  E&P   Refining & Petrochem.   Transportation   Supply and Marketing 
   3Q-12   3Q-11   3Q-12   3Q-11   3Q-12   3Q-11   3Q-12   3Q-11 
Domestic Sales   3,835.9    3,826.6    4,102.8    4,429.0    643.0    569.4    312.3    214.6 
International Sales   5,596.7    5,242.8    816.0    886.2    -    -    2,979.4    3,144.7 
Total Sales   9,432.6    9,069.4    4,918.8    5,315.2    643.0    569.4    3,291.7    3,359.3 
Operating Income/Loss   4,925.6    5,708.9    (23.1)   146.9    13.0    165.5    (2.4)   252.2 
Operating Margin   52.2%   62.9%   (0.5)%   2.8%   2.0%   29.1%   (0.1)%   7.5%
Net Income/Loss   3,306.2    4,020.5    (94.7)   (57.0)   65.1    146.5    (28.9)   86.7 
Net Margin   35.1%   44.3%   (1.9)%   (1.1)%   10.1%   25.7%   (0.9)%   2.6%
EBITDA   6,004.1    6,394.1    108.6    264.5    119.6    245.6    (0.6)   253.7 
Ebitda Margin   63.7%   70.5%   2.2%   5.0%   18.6%   43.1%   (0.0)%   7.6%

 

COP$ Billion  E&P   Refining & Petrochem.   Transportation   Supply and Marketing 
   Jan-Sep 12   Jan-Sep 11   Jan-Sep 12   Jan-Sep 11   Jan-Sep 12   Jan-Sep 11   Jan-Sep 12   Jan-Sep 11 
Domestic Sales  11,401.2   11,141.1   12,657.4   12,442.4   1,901.6   1,676.0   863.5   829.6 
International Sales   17,504.4    14,835.2    2,481.5    2,626.2    -    -    9,644.9    8,830.3 
Total Sales   28,905.6    25,976.3    15,139.0    15,068.6    1,901.6    1,676.0    10,508.4    9,659.9 
Operating Income/Loss   17,288.0    15,811.0    (61.2)   259.5    409.2    546.6    182.4    559.5 
Operating Margin   59.8%   60.9%   (0.4)%   1.7%   21.5%   32.6%   1.7%   5.8%
Net Income/Loss   11,449.8    10,656.4    (452.9)   (208.9)   251.9    408.9    17.3    159.3 
Net Margin   39.6%   41.0%   (3.0)%   (1.4)%   13.2%   24.4%   0.2%   1.6%
EBITDA   20,201.1    18,613.3    318.0    605.4    696.5    782.2    192.0    564.2 
Ebitda Margin   69.9%   71.7%   2.1%   4.0%   36.6%   46.7%   1.8%   5.8%

 

Note: The report by segment is based on transfer prices between business units, using as reference export parity prices. In line with the change in methodology, in 2011 a reclassification took place for the transportation segment, by which transportation services from third parties were allocated directly to the corresponding segment and were not booked as revenue for the transportation segment. Other figures of 2011 were also reclassified for reporting purposes.

 

Exploration and Production:

Revenues for the segment in the third quarter of 2012 exceeded those of the same quarter of 2011 owing largely to higher prices of crude. Despite the higher revenues, the segment’s operating and net results were lower primarily due to 1) the higher amortization and depletion costs, and 2) the higher hydrocarbon transported volumes.

 

Refining:

Although the Barrancabermeja refinery operation was stable and reliable throughout the quarter, the segment’s results in the third quarter of 2012 fell below those of the third quarter of 2011, due primarily to: 1) a reduction in refining margins as the result of lower selling prices of Colombian fuels, and 2) higher cost of feeds.

 

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Transportation:

The transportation segment posted higher revenue in the third quarter of the year than in the same period of 2011. However operating results were lower due to: 1) maintenance turnaround as part of the Integrity Program of storage facilities and pipelines; and 2) increased investments. The earnings of the affiliates had a positive impact on net results.

 

Supply and Market:

In the third quarter of 2012, revenues were lower than the same period a year ago due to a reduction in crude export volume. Operating and net results were lower primarily because of: 1) the increased costs of imported diluents; and 2) higher costs of transporting using tank trucks for purchased crude and diluent.

  

g.Ecopetrol S.A. balance sheet

 

Unconsolidated Balance Sheet        
(COP$ Billion)  September 30, 2012   June 30, 2012   ∆ (%) 
Current Assets   17,886.2    15,534.2    15.1%
Long Term Assets   72,625.6    71,172.6    2.0%
Total Assets   90,511.8    86,706.8    4.4%
Current Liabilities   20,347.7    20,028.7    1.6%
Long Term Liabilities   16,403.3    16,207.7    1.2%
Total Liabilities   36,751.0    36,236.4    1.4%
Equity   53,760.8    50,470.4    6.5%
Total Liabilities and Shareholders   90,511.8    86,706.8    4.4%
                
Debit Memorandum accounts   127,453.9    127,360.7      
Credit Memorandum accounts   119,556.9    111,986.0      

 

The main variation in assets was due to a COP$1,842 billion increase in cash and cash equivalents, and short-term investments as a result of the operational cash generation.

 

As of the end of September 2012, liabilities increased 1.4% compared to June of 2012, principally due to the COP$1,396 billion rise in the income tax provision, and accounts payable registration from the share subscription of Cenit Transporte y Logística de Hidrocarburos S.A.S.. Both increases were partially offset by the COP$3,500 billion July dividend payment.

 

Financial obligations accounted for 15.4% of total liabilities. The breakdown is the following: 1) a loan facility with Colombian banks with an outstanding balance of COP$1,776 billion; 2) Dollar denominated bonds for US$1.5 billion; 3) internal public debt bonds for COP$1.0 trillion; and 4) Gibraltar Gas Plant contract (BOMT) with a balance of COP$60.2 billion.

 

The 6.5% growth in equity is primarily the result of the net income in the third quarter of 2012.

 

h.Credit rating

 

In August, the credit rating agency Standard & Poor’s revised its corporate credit and debt rating outlook on Ecopetrol S.A. from stable to positive, and affirmed its BBB- investment grade rating.

 

The improvement in Ecopetrol’s corporate rating outlook by Standard & Poor’s is consistent with the agency’s decision on August 15 to upgrade the Republic of Colombia’s outlook from stable to positive.

 

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The Standard & Poor’s report mentions that Ecopetrol’s rating is based on its stand-alone risk profile as well as the high likelihood that the Colombian government would provide the Company timely, sufficient and extraordinary support in case of financial distress. The improvement in the outlook reflects the possibility that the company’s credit rating would increase if the sovereign were to be upgraded.

 

II. Consolidated financial results1

 

The following are Ecopetrol’s consolidated financial statements:

 

Consolidated Income Statement                    
(COP$ Billion)  3Q 2012 *   3Q 2011 *   ∆ (%)   Jan-Sep
2012*		   Jan-Sep
2011*		   ∆ (%) 
Local Sales   5,335.4    5,399.6    (1.2)%   16,283.4    15,699.0    3.7%
Export Sales   10,632.4    10,579.5    0.5%   33,227.4    30,071.4    10.5%
Sales of services   588.9    381.2    54.5%   1,583.0    1,279.5    23.7%
Total Sales   16,556.7    16,360.3    1.2%   51,093.8    47,049.9    8.6%
Variable Costs   7,641.9    6,826.6    11.9%   22,786.3    20,258.6    12.5%
Fixed Costs   2,587.4    2,058.1    25.7%   6,743.2    5,760.9    17.1%
Cost of Sales   10,229.3    8,884.7    15.1%   29,529.5    26,019.5    13.5%
Gross profit   6,327.4    7,475.6    (15.4)%   21,564.3    21,030.4    2.5%
Operating Expenses   776.1    786.5    (1.3)%   2,314.0    2,584.6    (10.5)%
Operating Profit   5,551.3    6,689.1    (17.0)%   19,250.3    18,445.8    4.4%
Non Operating Loss   (565.3)   (267.9)   111.0%   (1,865.8)   (1,595.1)   17.0%
Income tax   1,595.5    2,191.7    (27.2)%   5,850.6    5,716.0    2.4%
Minority interest   163.2    76.5    113.3%   375.7    120.2    212.6%
Net Income   3,227.3    4,153.0    (22.3)%   11,158.2    11,014.5    1.3%
                               
EBITDA   6,914.6    7,693.3    (10.1)%   23,150.1    22,218.4    4.2%
EBITDA Margin   42%   47%        45%   47%     

 

* Not audited, for illustration purposes only

 

The highest individual contributions to total sales (before eliminations) among affiliates during the third quarter of 2012 came from the Cartagena Refinery, with COP$1,755.8 billion; Hocol with COP$906.9 billion; Equión with COP$586.1 billion; Propilco S.A. with COP$349.2 billion; and Ocensa S.A. with COP$234.6 billion.

 

The affiliates with the highest net income were Equión, with COP$202.5 billion, ODL, with COP$164.6 billion, and Hocol, with COP$122.8 billion. The highest net losses were reported by Ecopetrol América Inc., with COP$71.8 billion, Ecopetrol Oleo e Gas do Brasil, with COP$13.6 billion, and, Reficar, with COP$11.7 billion.

 

 

1 For purposes of consolidation of the third quarter of 2012, in addition to Ecopetrol’s results, those of the following subsidiaries have been included:

 

Ecopetrol Oleo e Gas Do Brasil, Ecopetrol America Inc, Ecopetrol del Peru S.A., Hocol, Bioenergy S.A., Andean Chemicals Limited, ECP Global Energy, Propilco S.A., Comai, ODL Finance S.A., Black Gold Re Ltd., Ecopetrol Pipelines Limited, Oleoducto de Colombia, Ocensa S.A., Reficar S.A., Oleoducto Bicentenario, Ecopetrol Capital A.G., Equión Energía Limited, Ecopetrol Global Capital SLU, Cenit Transporte and Logística de Hidrocarburos S.A.S. (“Cenit”).

 

The consolidated financial statements for the third quarter of 2011 include the following affiliates: Ecopetrol Oleo e Gas Do Brasil, Ecopetrol America Inc, Ecopetrol del Peru S.A., Hocol, Bioenergy S.A., Andean Chemicals Limited, ECP Global Energy, Propilco S.A., Comai, ODL Finance S.A., Black Gold Re Ltd., Ecopetrol Transportation Company, Oleoducto de Colombia, Ocensa S.A., Reficar S.A., Oleoducto Bicentenario, Ecopetrol Capital A.G., Ecopetrol Transportation Investments Ltd., Equión Energía Limited (since January 24, 2011) and Ecopetrol Global Capital SLU.

 

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Ecopetrol del Perú, Ecopetrol Oleo & Gas do Brasil, Ecopetrol América and Bioenergy have not yet reported earnings either because they are in the pre-operating stage or are carrying out exploratory activities that have not yielded production (except for Ecopetrol América). A majority of the affiliates in the crude and product transport business generate earnings for the group by lowering transport costs.

 

By means of the equity participation method, Invercolsa contributed COP$ 15.2 billion, and Transgas de Occidente, COP$0.1 billion, while Serviport posted a loss of COP$ 0.1 billion.

 

EBITDA for the third quarter of 2012 was COP$6,914.6 billion, primarily as the result of the increase in sales cost, which represents an EBITDA margin of 42%.

  

Consolidated Balance Sheet        
         
(COP$ Billion)  September 30, 2012   June 30, 2012   Δ (%) 
Current Assets   23,255.5    19,949.8    16.6%
Long Term Assets   77,365.2    76,991.7    0.5%
Total Assets   100,620.7    96,941.5    3.8%
Current Liabilities   21,544.7    22,072.6    (2.4)%
Long Term Liabilities   23,123.2    22,352.8    3.4%
Total Liabilities   44,667.9    44,425.4    0.5%
Equity   53,328.6    50,058.0    6.5%
Minority interest   2,624.2    2,458.0    6.8%
Total Liabilities and Shareholders´ Equity   100,620.7    96,941.5    3.8%
                
Debit Memorandum accounts   133,899.1    133,394.9      
Credit Memorandum accounts   124,074.6    116,494.6      

  

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III. Business aspects

 

a.Investment plan

 

Ecopetrol´s capex:

 

Capex (US$ million)
Business Segment  3Q 2012   Allocation by
segment		   3Q 2011   Δ (%) 
Exploration   120.0    8.8%   28.0    328.6%
Production   840.1    61.6%   807.7    4.0%
Refining and Petrochemicals   86.3    6.3%   76.5    12.8%
Transportation   203.2    14.9%   255.2    (20.4)%
Supply and marketing   1.5    0.1%   0.5    200.0%
Subsidiaries   79.9    5.9%   152.4    (47.6)%
Acquisitions   0.3    0.0%   18.7    (98.4)%
Corporate   31.7    2.3%   19.7    60.9%
Total   1,363.0    100.0%   1,358.7    0.3%

 

Investments in the third quarter of 2012 were very similar to investments in the same period last year. However there was a 328.6% increase in the exploration segment due to the approval of more environmental licenses allowing: 1) drilling more exploratory wells, and 2) higher exploratory activity, mainly stratigraphic wells and seismic programs, primarily in the offshore.

 

b.Exploration

 

Exploration in Colombia:

 

Ecopetrol S.A.:

 

Drilling in Colombia (A3/A2 and Stratigraphic)
Ecopetrol S.A.

 

    3Q- 2012   Jan-Sep 2012
Type of well  

Number of

wells

   Hydrocarbon 
Presence *		  

In

evaluation

   Dry  

Number of

wells

   Hydrocarbon 
Presence *		  

In evaluation

   Dry
A3/A2   4   2   1   1   6   4   1   1
Stratigraphic   7   7   0   0   15   9   0   6**
Total   11   9   1   1   21   13   1   7

 

* Geological success; ** No geological success

 

During the third quarter of 2012, 7 appraisal wells (A1) were drilled, bringing the total to 24 wells (A1) from January to September 2012.

 

The following is a summary of wells drilled during the third quarter of 2012:

 

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Drilling summary (A3/A2 and Stratigraphic): 3Q-2012
Ecopetrol S.A.

    Type of well   Basin   Block   Well   Result
1   A3   VMM   PLAYÓN   AULLADOR-1   Hydrocarbon presence*
2   A3   LLA   CAÑO SUR   EMBRUJO-1 ST2**   Hydrocarbon presence*
3   A3   LLA   CAÑO SUR   RETO-1   Dry
4   A3   OFFSHORE   RC5   MAPALE-1   Under evaluation
5   Stratigraphic   LLA   CAÑO SUR   CUMANDAY-1   Hydrocarbon presence*
6   Stratigraphic   LLA   CAÑO SUR   CSE - X-12   Hydrocarbon presence*
7   Stratigraphic   LLA   CAÑO SUR   CSE-X-3   Hydrocarbon presence*
8   Stratigraphic   LLA   CAÑO SUR   CSE-X-4   Hydrocarbon presence*
9   Stratigraphic   LLA   CAÑO SUR   CSE X-14   Hydrocarbon presence*
10   Stratigraphic   LLA   CAÑO SUR   CSE X-11   Hydrocarbon presence*
11   Stratigraphic   LLA   CAÑO SUR   CSE X-9A   Hydrocarbon presence*

 

* Geological success

** Initially reported as an A1 well to the Ministry of Mines and Energy of Colombia but is in the process of being reclassified as A3 given the discovery of a new structure.

 

Hocol S.A.:

 

Drilling in Colombia (A3/A2 and Stratigraphic)
Hocol S.A.

    3Q- 2012   Jan-Sep 2012
Type of well  

Number of

wells

   Hydrocarbon 
Presence *		  

Under

evaluation

   Dry  

Number of

wells

   Hydrocarbon 
Presence *		  

Under evaluation

   Dry
A3/A2   1   0   0   1   6   3   0   3
Stratigraphic   1   1   0   0   11   4   0   7**
Total   2   1   0   1   17   7   0   10

 

* Geological success; ** No Geological success

 

The following is a summary of wells drilled during the third quarter of 2012:

 

Drilling summary (A3/A2 and Stratigraphic): 3Q-2012
Hocol S.A.

 

    Type of well   Basin   Block   Well   Result
1   A3/A2   VIM   Perdices   Granate W1   Dry
2   Stratigraphic   LLA   CPO 16   8   Hydrocarbon presence*

 

* Geological success

 

Equión S.A.:

 

During the third quarter, the exploratory well Mapale-1 was drilled on Colombia’s Atlantic Coast and was under evaluation as of Septermber 30.

 

International exploration:

 

Ecopetrol del Brasil

 

During the third quarter, three exploration blocks were acquired in the Santos basin (BM-S-63, BM-S-71 and BM-S-72) with a pending approval by the National Petroleum Agency (Agencia Nacional de Petróleo, ANP). The well Sabiá was also drilled on block BM-S-72 but did not show evidence of hydrocarbons (to be expensed in the fourth quarter), and as of september 30 the Canário well (on block BM-S-63) was being drilled.

 

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Ecopetrol América Inc:

 

During the third quarter, the exploratory well Parmer was drilled, located in deep waters of the U.S. Gulf Coast of Mexico, showing evidence of hydrocarbons. At the end of the quarter, drilling had begun on the Dalmatian and Candy Bars wells, both located in the U.S. Gulf Coast of Mexico.

 

Savia:

 

During the third quarter, affiliate Savia Perú evaluated the results of the exploratory well Colan-1, which showed presence of hydrocarbons but was determined to be commercially unsuccessful.

 

c.Production

 

Total production (Ecopetrol S.A. including interests in affiliates and subsidiaries)

 

Production

 

Ecopetrol S.A. gross oil and gas                        
production (mboed)  3Q 2012   3Q 2011   ∆ (%)   Jan-Sep 2012   Jan-Sep 2011   ∆ (%) 
Crude Oil   583.6    575.2    1.5%   586.7    563.5    4.1%
Natural Gas*   108.7    102.3    6.3%   110.1    99.3    10.9%
Total   692.3    677.5    2.2%   696.8    662.8    5.1%

 

Hocol (mboed)  3Q 2012   3Q 2011   ∆ (%)   Jan-Sep 2012   Jan-Sep 2011   ∆ (%) 
Crude Oil   23.4    30.5    (23.3)%   25.6    30.4    (15.8)%
Natural Gas   0.1    0.6    (83.3)%   0.3    0.5    (40.0)%
Total   23.5    31.1    (24.4)%   25.9    30.9    (16.2)%

 

Savia (mboed)  3Q 2012   3Q 2011   ∆ (%)   Jan-Sep 2012   Jan-Sep 2011   ∆ (%) 
Crude Oil   6.1    5.7    7.0%   6.1    5.8    5.2%
Natural Gas   1.6    1.1    45.5%   1.4    1.1    27.3%
Total   7.7    6.8    13.2%   7.5    6.9    8.7%

 

Equion (mboed)  3Q 2012   3Q 2011   ∆ (%)   Jan-Sep 2012   Jan-Sep 2011   ∆ (%) 
Crude Oil   10.4    8.2    26.8%   10.8    7.8    38.5%
Natural Gas   7.7    6.4    20.3%   7.2    6.2    16.1%
Total   18.1    14.6    24.0%   18.0    14.0    28.6%

 

Ecopetrol America-K2 (mboed)  3Q 2012   3Q 2011   ∆ (%)   Jan-Sep 2012   Jan-Sep 2011   ∆ (%) 
Crude Oil   1.3    1.4    (7.1)%   1.7    1.7    0.0%
Natural Gas   0.2    0.1    100.0%   0.2    0.1    100.0%
Total   1.5    1.5    0.0%   1.9    1.8    5.6%

 

Ecopetrol including affiliates and                        
subsidiares  3Q 2012   3Q 2011   ∆ (%)   Jan-Sep 2012   Jan-Sep 2011   ∆ (%) 
Crude Oil   624.8    621.0    0.6%   630.9    609.2    3.6%
Natural Gas   118.3    110.5    7.1%   119.2    107.2    11.2%
Total Group's production   743.1    731.5    1.6%   750.1    716.4    4.7%

* Gas production includes white products

 

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Production of Ecopetrol S.A.:

 

Production per type of crude*
   3Q 2012   3Q 2011   Δ (%)   Jan-Sep2012   Jan-Sep2011   Δ (%) 
Light crudes   57.7    60.4    -4.5%   61.2    60.0    2.0%
Medium crudes   229.2    226.6    1.1%   227.7    231.6    -1.7%
Heavy crudes   296.7    288.2    2.9%   297.7    271.9    9.5%
Total   583.6    575.2    1.5%   586.6    563.5    4.1%

*Does not include subsidiary companies

 

Production of heavy crude oil accounted for 51% of total crude production. The following is a summary of the production of the main fields (Ecopetrol’s interest):

 

Ecopetrol´s production in main fields
(mboed)
   3Q 2012   3Q 2011   Δ (%)   2012   Jan-Sep2011   Δ (%) 
Castilla   108.4    115.4    (6.0)%   110.5    110.8    (0.3)%
Rubiales   99.2    98.5    0.6%   99.2    91.5    8.4%
Guajira   58.4    62.2    (6.0)%   59.9    63.1    (5.0)%
Chichimene   42.6    28.3    50.5%   43.2    24.6    75.8%
Caño Limon   35.4    50.9    (30.6)%   33.0    50.3    (34.5)%
Mature fields (Magd. Valley)   28.9    16.2    78.4%   30.1    15.3    96.6%
Casabe   24.3    18.5    30.9%   22.9    17.7    29.5%
La Cira-Infantas   22.9    20.0    15.0%   21.7    19.2    12.8%
Apiay and other   22.1    22.6    (2.2)%   21.2    22.4    (5.2)%
Other heavy crude   15.4    15.5    (0.6)%   16.1    15.0    7.4%

 

Lifting costs of Ecopetrol S.A.:

 

Lifting cost per barrel produced for Ecopetrol S.A. in the period January-September 2012 was US$10.78 (based on the methodology approved by the U.S. Securities and Exchange Commission, which does not include royalties in the calculation of cost per barrel), an increase of US$1.28 per barrel compared to the same period last year, as a net result of:

 

·Higher costs: +US$1.64 per barrel

 

1.High price clauses in joint venture agreements (windfall profit clauses).

 

2.Management and disposal of waters, due to the increase in total fluid levels and environmental restrictions.

 

3.Increased industrial services owing to initiatives for the reactivation of wells.

 

4.Increased maintenance to improve equipment reliability.

 

·Revaluation of the Colombian peso vs. the U.S. dollar: +US$0.16 per barrel

 

·Lower costs associated with the higher volume produced: -US$0.52 per barrel

 

d.Refining

 

Barrancabermeja Refinery:

 

               Jan-Sep   Jan-Sep     
Barrancabermeja Refinery  3Q 2012   3Q 2011   Δ (%)   2012   2011   Δ(%) 
Refinery runs* (mbod)   235.7    226.8    3.9%   218.1    228.8    (4.7)%
Utilization factor (%)   83.4%   78.5%   6.2%   75.8%   81.3%   (6.8)%

* Includes volumes used in the refinery, not total volumes received.

 

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Both crude throughputs and the utilization factor at the refinery increased during the third quarter of 2012 compared to the same period of last year, due to mechanical reliability, and no major maintenance was required.

 

The modernization project was 12.3% complete as of the end of the third quarter. The other milestone was the start of the contract for the upgrade of the U-250 crude unit.

 

The master plan for industrial services reached a 52.2% progress as of the end of the third quarter, including five new compressors and seven refurbished compressors.

 

Costs and margins of the Barrancabermeja Refinery:

 

The refinery’s operating cash cost for the period January-September 2012 was US$6.18 per barrel, US$0.84 per barrel higher than the same period of last year, which was the result of higher costs generated by:

 

·Scheduled turnarounds during the first semester of the year and a higher use of industrial services: +US$0.48 per barrel

 

·Lower throughput due to maintenance during the first quarter of 2012: +US$0.27 per barrel

 

·Revaluation of the Colombian peso vs. the U.S. dollar: +US$0.09 per barrel

 

               Jan-Sep   Jan-Sep     
Barrancabermeja Refinery  3Q 2012   3Q 2011   Δ (%)   2012   2012   Δ (%) 
Refining Margin (USD/bl)   13.9    15.7    (11.3)%   11.0    13.3    (17.4)%

 

Gross refining margin in third quarter 2012 decreased compared to the same period of last year due to higher refinery’s feedstock price (higher export prices of Ecopetrol´s crude, used as index for the feedstock).

 

Reficar S.A. (Cartagena Refinery):

 

               Jan-Sep   Jan-Sep     
Cartagena Refinery  3Q 2012   3Q 2011   Δ (%)   2012   2011   Δ (%) 
Refinery runs* (mbod)   74.2    75.1    (1.2)%   73.6    76.9    (4.3)%
Utilization factor ()%   78.6%   83.0%   (5.3)%   66.8%   84.0%   (20.5)%

* Includes volumes used in the refinery, not total volumes received

 

In the third quarter of 2012, the throughput and utilization factor decreased due to operating restrictions on the crude unit.

 

               Jan-Sep   Jan-Sep     
Cartagena Refinery  3Q 2012   3Q 2011   Δ (%)   2012   2012   Δ (%) 
Refining Margin (USD/bl)   5.7    11.5    (50.4)%   5.6    9.4    (40.4)%

 

The gross refining margin for the third quarter of 2012 decreased compared to the same period of last year due to a higher price of the refinery’s crude feedstock as a consequence of: 1) of a larger share of light crude, and 2) rising export prices of Ecopetrol, which are the used as index for the feedstock.

 

The expansion and modernization project reached a 71% progress as of September 30, 2012. The progress in each of the work streams was the following:

 

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  · Detailed engineering: 97.2%
       
  · Procurement 92.6%
       
  · Module construction: 100.0%
       
  · Construction (begun on October 2011): 31.3%

 

The project is expected to be finished during the first half of 2014.

 

e.Transportation

 

Transported volumes:

 

               Jan-Sep   Jan-Sep     
Transported volumes (mbod)  3Q 2012   3Q 2011   Δ (%)   2012   2011   Δ (%) 
Crude   873.5    930.9    (6.2)%   895.2    912.0    (1.8)%
Refined Products   305.8    292.5    4.5%   303.4    283.2    7.1%
Total   1,179.3    1,223.4    (3.6)%   1,198.6    1,195.2    0.3%

 

During the third quarter of 2012, a lower volume of crude was transported in comparison with the same period of 2011, mainly as a result of: 1) reduced flow along the Apiay–Porvenir, Rubiales–Monterrey and Santiago–El Porvenir pipelines due to the emergency situation at the Porvenir station in August, suspending the operation of Segment II of Ocensa; 2) reduction in pumping in the 20” Vasconia–GRB Pipeline due to a flow restriction caused by a defect that affected discharge pressure; and 3) lower availability of the Caño Limón–Coveñas and Transandino systems.

 

The following are highlights of the third quarter of 2012:

 

·Products: Increase in the capacity to transport solvent in the Sebastopol and Apiay product pipeline (from 53 to 90 mbod).

 

·Crude oil: Completion of assembly and connection of the pumping units at the Paramo Station in preparation for their operation. These units will increase the Transandino System’s (OTA) capacity from 45 to 60 mbod.

 

Bicentenario Oil Pipeline:

 

General progress in project implementation was 59.4% by the end of the third quarter of the year (includes the Araguaney–Banadía line, Coveñas stations, and storage). The process of filling the Araguaney-Banadía Pipeline is expected to begin in the first half of 2013.

 

CENIT S.A.:

 

During the quarter, progress was made on two work streams:

 

1.Transfer of Ecopetrol’s shares in Ocensa, ODC, ODL, OBC and Serviport to CENIT.
2.Definition and implementation of logistical components required by the operation (hiring of personnel and IT solutions).

 

CENIT is expected to begin operations during the first quarter of 2013.

 

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Transportation costs:

 

The barrel/kilometer transport cost for the period January-September 2012 was COP$9.10/BKM, an increase of COP$2.03/BKM compared to the same period last year, mostly due to:

 

·Higher costs of COP$2.09/BKM associated with: 1) the higher volumes of drag reducing agents; 2) maintenance turnaround to assure infrastructure reliability and integrity aimed at mitigating the effects of the harsh weather; 3) higher depreciations from new revamped systems, as well as new oil and multipurpose pipelines; 4) higher costs of studies and start-up projects to improve the management of existing infrastructure integrity.

 

·Lower costs of COP$0.06/BKM from higher volumes transported

 

f.Biofuels

 

Ecodiesel Colombia S.A.:

 

Biodiesel production in the third quarter of 2012 increased to 27,904 tons, 6.1% higher than production in the third quarter of last year as a result of: 1) optimization of raw material (CPO), and 2) the higher utilization factor of the plant.

 

Bioenergy S.A.:

 

As of September 30, 2012, the Bioenergy project reached a 56.2% progress (56.6% in its industrial component and 55.3% in its agricultural component).

 

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IV. Organizational consolidation, social corporate responsibility and corporate government

 

a.Organizational consolidation

 

Health, Safety and Environment (HSE) performance:

 

HSE Index  3Q 2012   3Q 2011   Jan-Sep2012   Jan-Sep2011 
                 
Accident frequency index (accidents per million labor hours)   0.65    0.86    0.85    1.04 
                     
Environmental incidents*   5    13    23    30 

 

* The number of incidents could change after the end of the quarter given that accidents and incidents could be reclassified depending on the final result of the investigations.

 

It’s important to highlight the historical minimum figure of the accident frequency index during the quarter.

 

Science and technology:

 

The following are the major milestones in the third quarter of 2012:

 

·Ecopetrol was granted a patent by the Superintendence of Industry and Trade of Colombia for the technology invention “Intelligent tool for the detection of boreholes and interpretation of online data”.

 

·Ecopetrol S.A. was granted two patents by the Russian government for inventing the following technologies designed for theft reduction: 1) “Tool for the safe removal of valves installed on pipelines”, and 2) “Feeder equipment and procedure for plugging fluid transport pipeline bypasses based on such equipment”.

 

b.Corporate responsibility

 

Social investments:

 

During the first nine months of the year, COP$104,4 million was invested in developing social investment agreements, allocated as follows: 1) COP$40,1 million for education and culture, 2) COP$15,2 million for citizens and democracy; and 3) COP$49,1 million for regional competitiveness.

 

Dow Jones Sustainability Index:

 

For a second consecutive year, Ecopetrol S.A. was included in the Dow Jones Sustainability World Index. Ecopetrol is among the top 10% of companies with the best sustainability performance out of the 2,500 companies trading on stock exchanges, including four Colombian companies. The social, economic and environmental areas received higher scores in the 2012 assessment.

 

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V. Conference calls

 

Ecopetrol’s management will host two webcasts to review results for the third quarter of 2012:

 

Spanish English
October 30, 2012 October 30, 2012
1:30 p.m. Bogota 3:00 p.m. Bogota
2:30 p.m. New York / Toronto 4:00 p.m. New York / Toronto

 

The webcast will be available on Ecopetrol’s website www.ecopetrol.com.co

 

Please access the site 10 minutes beforehand in order to download the necessary software. A copy of the webcast will remain available for one year following the live event.

 

About Ecopetrol S.A.

Ecopetrol S.A. (BVC: ECOPETROL; NYSE: EC; TSX: ECP) is the largest company in Colombia based on revenue, profits, assets and net equity. Ecopetrol is the only Colombian vertically integrated crude oil and natural gas company with operations in Colombia, Brazil, Peru and the U.S. Gulf Coast. Its affiliates include the following companies: Propilco, Black Gold Re Ltd., Ecopetrol Oleo e Gas do Brasil Ltda., Ecopetrol America Inc., Ecopetrol del Perú S.A., Hocol, Equión Energía Limited, Andean Chemicals Limited, COMAI, Bioenergy S.A., ODL Finance S.A., ECP Global Energy, Ecopetrol Transportation Company, Ocensa S.A., Oleoducto de Colombia, Refinería de Cartagena, Ecopetrol Transportation Investment, Ecopetrol Capital AG, Oleoducto Bicentenario de Colombia S.A.S., and Cenit Transport and Logistics of Hydrocarbons S.A.S . (“Cenit”). Ecopetrol S.A. is one of the 50 largest oil companies in the world and one of the four main oil companies in Latin America. The company is majority owned by the Republic of Colombia (88.5)%, and its shares trade on the Bolsa de Valores de Colombia S.A. (BVC) under the ticker “ECOPETROL”, the New York Stock Exchange (NYSE) under the ticker “EC”, and the Toronto Stock Exchange (TSX) under the ticker “ECP”. The company divides its operations into four business segments as follows: 1) Exploration and Production, 2) Transport, 3) Refining & Petrochemicals, and 4) Supply and Marketing.

 

For more information on Ecopetrol, please visit www.ecopetrol.com.co

 

Forward-looking statements

This news release contains forward-looking statements related to the prospects of the business, estimates for operating and financial results, and growth forecasts of Ecopetrol. These are projections, and, as such, are solely based on the expectations of management concerning the future of the company and its continued access to capital to finance the company’s business plan. Such forward-looking statements depend, essentially, on changes in market conditions, government regulations, competitive pressures, performance of the Colombian economy and industry, among other factors; therefore, they are subject to change without prior notice.

 

Contact information:

 

Investor Relations Director

Alejandro Giraldo

Telephone: +571-234-5190

E-mail: investors@ecopetrol.com.co

 

Media relations (Colombia)

Jorge Mauricio Tellez

Telephone: + 571-234-4329

E-mail: mauricio.tellez@ecopetrol.com.co

 

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VI. Exhibits: Ecopetrol S.A.

 

Unaudited Income Statement

Ecopetrol S.A.

 

COP$ Million                            
   3Q 2012*   3Q 2011*   Δ (%)   2Q 2012*   Jan-Sep 2012*   Jan-Sep 2011*   Δ (%) 
Income                                   
Local Sales   4,395,549    4,480,550    (1.9)%   4,630,116    13,622,450    13,066,576    4.3%
Export Sales   8,094,825    7,933,934    2.0%   8,463,542    25,690,558    22,208,842    15.7%
Sales to free trade zone   1,297,320    1,339,827    (3.2)%   1,295,342    3,940,270    4,082,861    (3.5)%
Sale of Services   441,097    379,099    16.4%   407,131    1,216,947    1,079,865    12.7%
Total Income   14,228,791    14,133,410    0.7%   14,796,131    44,470,225    40,438,144    10.0%
Cost of Sales                                   
Variable Costs                                   
Purchase of Hydrocarbons   3,371,585    3,056,687    10.3%   3,424,619    10,354,054    8,926,318    16.0%
Amortization and Depletion   867,518    486,979    78.1%   822,164    2,417,969    2,247,065    7.6%
Imported products   1,413,346    1,581,397    (10.6)%   1,887,354    5,154,701    4,392,357    17.4%
Hydrocarbon Transportation Services (1)   491,696    438,372    12.2%   503,186    1,507,389    1,241,434    21.4%
Inventories and other   509,820    87,686    481.4%   (151,077)   142,463    9,378    1,419.1%
                                    
Fixed Costs                                   
Depreciation   335,018    288,993    15.9%   312,210    948,458    845,976    12.1%
Contracted Services   756,493    625,779    20.9%   716,081    2,084,702    1,730,009    20.5%
Maintenance   415,454    268,086    55.0%   328,492    964,441    725,078    33.0%
Labor Costs   253,222    232,497    8.9%   262,938    758,294    652,508    16.2%
Other   351,074    221,521    58.5%   201,902    707,403    580,376    21.9%
Total Cost of Sales   8,765,226    7,287,997    20.3%   8,307,869    25,039,874    21,350,499    17.3%
Gross Profits   5,463,565    6,845,413    (20.2)%   6,488,262    19,430,351    19,087,645    1.8%
Operating Expenses                                   
Administration   149,130    161,272    (7.5)%   152,097    452,318    453,097    (0.2)%
Selling expenses (3)   286,816    207,114    38.5%   147,913    689,838    557,444    23.8%
Exploration and Projects   114,481    203,495    (43.7)%   186,996    469,620    900,797    (47.9)%
Operating Income/Loss   4,913,138    6,273,532    (21.7)%   6,001,256    17,818,575    17,176,307    3.7%
Non Operating Income (expenses)                                   
Financial Income   646,260    1,295,202    (50.1)%   1,307,117    3,212,712    3,463,650    (7.2)%
Financial Expenses   (553,117)   (1,310,734)   57.8%   (1,212,166)   (3,199,755)   (4,030,572)   20.6%
Interest expenses   (94,198)   (55,532)   69.6%   (122,802)   (272,609)   (124,848)   118.4%
Non Financial Income   127,009    288,424    (56.0)%   204,290    500,188    748,345    (33.2)%
Non Financial Expenses   (641,488)   (365,940)   75.3%   (613,097)   (2,126,679)   (1,474,378)   44.2%
Results from Subsidiaries   311,150    134,341    131.6%   (33,349)   721,765    573,179    25.9%
                                    
Income before income tax   4,708,754    6,259,293    (24.8)%   5,531,249    16,654,197    16,331,683    2.0%
Provision for Income Tax   1,461,105    2,062,581    (29.2)%   1,855,770    5,388,017    5,315,963    1.4%
Minority interest                                   
Net Income   3,247,649    4,196,712    (22.6)%   3,675,479    11,266,180    11,015,720    2.3%
                                    
EBITDA   6,231,682    7,157,924    (12.9)%   7,056,603    21,407,574    20,565,038    4.1%
EBITDA MARGIN   44%   51%        48%   48%   51%     
EARNINGS PER SHARE   78.99    103.68    (23.8)%   89.39    274.00    272.16    0.7%

 

* Not audited, for illustration purposes only

 

(1)For comparisons, were tranfered from commercial expenses the following: in 3Q-2011 COP$137 billion and in the first half of 2011 COL$317.3 billion corresponds to hydrocarbon transport.

In order to make comparisons, from 2011 onwards reclassifications were done within the cost of sales

 

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Unaudited Income Statement

Ecopetrol Consolidated

  

COP$ Million                            
   3Q-2012*   3Q-2011 *   Δ (%)   2Q-2012*   Jan-Sep 2012*   Jan-Sep 2011*   Δ (%) 
Income                                   
Local Sales   5,335,365    5,399,588    (1.2)%   5,590,008    16,283,352    15,698,961    3.7%
Export Sales   10,632,363    10,579,496    0.5%   10,406,605    33,227,421    30,071,432    10.5%
Sale of Services   588,946    381,206    54.5%   512,607    1,583,044    1,279,454    23.7%
Total Income   16,556,674    16,360,290    1.2%   16,509,220    51,093,817    47,049,847    8.6%
Cost of Sales                                   
Variable Costs                                   
Purchase of Hydrocarbons   3,991,916    3,757,229    6.2%   3,452,230    11,957,341    10,907,171    9.6%
Amortization and Depletion   994,921    616,134    61.5%   976,666    2,871,457    2,633,746    9.0%
Imported products   2,004,988    2,254,830    (11.1)%   2,574,184    6,980,939    6,123,618    14.0%
Hydrocarbon Transportation Services   155,842    149,278    4.4%   377,385    780,987    627,349    24.5%
Inventories and other   494,275    49,152    905.6%   (15,473)   195,596    (33,284)   687.7%
                                    
Fixed Costs                                   
Depreciation   495,400    453,905    9.1%   470,067    1,414,485    1,344,630    5.2%
Contracted Services   772,412    601,128    28.5%   723,556    2,115,451    1,650,352    28.2%
Maintenance   507,081    358,242    41.5%   391,739    1,217,251    1,025,548    18.7%
Labor Costs   275,825    308,669    (10.6)%   264,920    793,189    830,220    (4.5)%
Other   536,727    336,178    59.7%   325,768    1,202,808    910,111    32.2%
Total Cost of Sales   10,229,387    8,884,745    15.1%   9,541,042    29,529,504    26,019,461    13.5%
Gross Profits   6,327,287    7,475,545    (15.4)%   6,968,178    21,564,313    21,030,386    2.5%
Operating Expenses                                   
Administration   210,919    227,910    (7.5)%   218,458    684,145    773,192    (11.5)%
Selling expenses   316,099    246,962    28.0%   197,996    783,942    646,763    21.2%
Exploration and Projects   249,087    311,640    (20.1)%   366,665    845,951    1,164,601    (27.4)%
Operating Income/Loss   5,551,182    6,689,033    (17.0)%   6,185,059    19,250,275    18,445,830    4.4%
Non Operating Income (expenses)                                   
Financial Income   35,947    4,191,432    (99.1)%   2,012,010    3,984,027    6,668,981    (40.3)%
Financial Expenses   66,783    (4,255,792)   (101.6)%   (1,911,282)   (3,783,414)   (7,205,515)   47.5%
Interest expenses   (137,064)   (93,019)   47.4%   (175,415)   (415,243)   (236,382)   75.7%
Non Financial Income   155,253    282,012    (44.9)%   242,122    574,413    782,391    (26.6)%
Non Financial Expenses   (686,231)   (392,556)   74.8%   (586,685)   (2,225,538)   (1,604,579)   38.7%
                                    
Income before income tax   4,985,870    6,421,110    (22.4)%   5,765,809    17,384,520    16,850,726    3.2%
Provision for Income Tax   1,595,481    2,191,670    (27.2)%   2,009,931    5,850,569    5,715,990    2.4%
Minority interest   163,234    76,484    113.4%   98,737    375,713    120,163    212.7%
Net Income   3,227,155    4,152,956    (22.3)%   3,657,141    11,158,238    11,014,573    1.3%
                                    
EBITDA   6,914,600    7,693,295    (10.1)%   7,456,278    23,150,113    22,218,370    4.2%
EBITDA MARGIN   42%   47%        45%   45%   47%     

 

Notes

* According to the Public Accounting Framework, Colombian companies only have the obligation to consolidate their financial statements at the end of each fiscal year. Therefore, the quarterly figures in this report are not audited and they do not constitute a formal consolidation of Ecopetrol's financial statements though they do adjust to the methodology defined for this purpose.

This statement is not audited

 

Dirección de Relacionamiento con el Inversionista Tel: 2345190, correo electrónico: investors@ecopetrol.com.co
www.ecopetrol.com.co

23 
 

 

Balance Sheet

Unaudited

  

   Ecopetrol S.A.       Ecopetrol Consolidated     
   September 30, 2012   June 30, 2012   Δ(%)   September 30, 2012   June 30, 2012   Δ (%) 
                         
COP$ Million                        
                         
Assets                              
Current Assets                              
Cash and cash equivalents   4,722,551    4,063,131    16.2%   7,156,467    5,958,773    20.1%
Investments   1,783,845    600,592    197.0%   1,895,316    620,557    205.4%
Accounts and notes receivable   4,356,640    3,964,621    9.9%   5,481,692    4,983,644    10.0%
Inventories   2,586,242    2,723,353    (5.0)%   3,088,542    3,165,111    (2.4)%
Other   4,436,959    4,182,511    6.1%   5,633,436    5,221,695    7.9%
Total Current Assets   17,886,237    15,534,208    15.1%   23,255,453    19,949,780    16.6%
Non Current Assets                              
Investments   19,659,144    18,619,650    5.6%   4,589,264    6,253,321    (26.6)%
Accounts and notes receivable   1,533,390    1,597,526    (4.0)%   621,291    440,354    41.1%
Property, plant and equipment, net   20,848,404    20,422,903    2.1%   33,604,752    32,216,830    4.3%
Natural and environmental properties, Net   13,993,004    13,935,851    0.4%   16,844,097    16,456,955    2.4%
Resources delivered to administration   310,509    292,287    6.2%   321,666    321,666    0.0%
Other   16,281,103    16,304,410    (0.1)%   21,384,171    21,302,575    0.4%
Total Non Current Assets   72,625,554    71,172,627    2.0%   77,365,241    76,991,701    0.5%
Total Assets   90,511,790    86,706,835    4.4%   100,620,694    96,941,481    3.8%
                               
Liabilities and Equity                              
Current Liabilities                              
Financial obligations   446,902    448,892    (0.4)%   1,887,481    921,243    104.9%
Accounts payable and related parties   12,641,532    13,752,469    (8.1)%   10,801,855    13,888,744    (22.2)%
Estimated liabilities and provisions   1,698,572    1,467,326    15.8%   2,525,520    2,264,872    11.5%
Other   5,560,697    4,360,013    27.5%   6,329,839    4,997,754    26.7%
Total Current Liabilities   20,347,703    20,028,700    1.6%   21,544,695    22,072,613    (2.4)%
Long Term Liabilities                              
Financial obligations   5,209,607    5,239,811    (0.6)%   10,876,029    9,962,701    9.2%
Labor and pension plan obligations   3,477,345    3,384,102    2.8%   3,486,082    3,392,839    2.7%
Estimated liabilities and provisions   4,089,402    3,998,027    2.3%   4,205,364    4,110,787    2.3%
Other   3,626,970    3,585,794    1.1%   4,555,697    4,886,495    (6.8)%
Total Long Term Liabilities   16,403,324    16,207,734    1.2%   23,123,172    22,352,822    3.4%
Total Liabilities   36,751,027    36,236,434    1.4%   44,667,867    44,425,435    0.5%
Minoritary Interest                  2,624,208    2,458,035    6.8%
Equity   53,760,763    50,470,401    6.5%   53,328,619    50,058,011    6.5%
                               
Total Liabilities and Shareholders' Equity   90,511,790    86,706,835    4.4%   100,620,694    96,941,481    3.8%
                               
Memorandum Debtor Accounts *   127,453,882    127,360,652         133,899,071    133,394,876      
Memorandum Creditor Accounts *   119,556,865    111,986,030         124,074,616    116,494,600      

 

Notes

* Under Colombian GAAP, these accounts represent facts or circumstances from which rights or obligations could derive and affect the Company, however, these accounts are not

included in the Balance Sheet

 

Dirección de Relacionamiento con el Inversionista Tel: 2345190, correo electrónico: investors@ecopetrol.com.co
www.ecopetrol.com.co

24 
 

 

 

Unaudited Cash Flow Statement

Ecopetrol S.A.

 

COP$ million  3Q 2012 *   3Q 2011 *   ∆ (%)   2Q 2012 *   Jan-Sep 2012*   Jan-Sep 2011*   ∆ (%) 
Cash flow provided by operating activities:                    
Net income   3,247,649    4,196,712    (22.6)%   3,675,480    11,266,180    11,015,720    2.3%
Adjustments to reconcile net income to cash provided by operating activities:                                   
Depreciation, depletion and amortization   1,462,408    1,088,944    34.3%   1,456,323    4,134,889    3,667,228    12.7%
Net provisions   256,217    (13,545)   1,991.6%   109,310    489,943    (61,029)   902.8%
Disposal of property, plant and equipment   13    1,921    (99.3)%   (36)   127    2,320    (94.5)%
Loss for disposal of property, plant and equipment   -    -    0.0%   -    -    -    0.0%
Loss for disposal of natural and environmental resources   -    -    0.0%   -    3,490    -    0.0%
Loss for disposal of other assets   78    20    290.0%   -    78    288    (72.9)%
Income (loss) from equity method on affiliated companies   (311,149)   (134,340)   131.6%   33,348    (721,765)   (573,179)   25.9%
Net changes in operating assets and liabilities:                                   
Accounts and notes receivable   (577,331)   (1,619,376)   64.3%   (959,449)   (357,023)   (3,679,862)   90.3%
Inventories   137,954    59,917    130.2%   (84,014)   (178,789)   (188,276)   5.0%
Deferred and other assets   152,040    (169,525)   189.7%   (89,003)   547,183    (1,712,166)   132.0%
Accounts payable and related parties   102,380    (366,410)   127.9%   (497,657)   1,798,607    2,146,728    -16.2%
Taxes payable   1,166,604    1,602,787    (27.2)%   (4,771,670)   (2,220,898)   3,482,061    (163.8)%
Labor obligations   31,917    31,218    2.2%   28,097    17,654    20,080    (12.1)%
Estimated liabilities and provisions   (228,424)   35,810    (737.9)%   (68,270)   (411,968)   (57,880)   611.8%
Cash provided by operating activities   5,440,356    4,714,133    15.4%   (1,167,541)   14,367,708    14,062,033    2.2%
                                    
Cash flows from investing activities:                                   
Payment for purchase of Companies, net of cash acquired   (2,300)   (55,809)   95.9%   -    (2,300)   (868,954)   99.7%
Purchase of investment securities   (1,157,185)   (71,606)   1516.0%   (444,395)   (8,472,896)   (9,657,535)   12.3%
Redemption of investment securities   1,556,177    (1,150,681)   235.2%   4,400,585    8,414,398    7,384,942    13.9%
Sale of property, plant and equipment   -    -    0.0%   -    -    -    0.0%
Investment in natural and environmental resources   (796,721)   (785,202)   (1.5)%   (1,009,181)   (2,347,903)   (2,179,718)   7.7%
Additions to property, plant and equipment   (825,278)   (1,808,792)   54.4%   (834,476)   (2,851,333)   (4,369,621)   34.7%
Net cash generated by investing activities   (1,225,307)   (3,872,090)   68.4%   2,112,533    (5,260,034)   (9,690,886)   45.7%
                                    
Cash flows from financing activities:                                   
Financial obligations   (56,074)   151,475    (137.0)%   (173,986)   (301,376)   (53,367)   464.7%
Received from associates - capitalization   -    478,467    (100.0)%   -    -    478,494    (100.0)%
Dividends   (3,499,555)   (1,994,449)   75.5%   (4,919,777)   (8,386,790)   (3,915,703)   114.2%
Net cash used in financing activities   (3,555,629)   (1,364,507)   160.6%   (5,093,763)   (8,688,166)   (3,490,576)   148.9%
                                    
Net increase (decrease) in cash and cash equivalents   659,420    (522,464)   226.2%   (4,148,771)   419,508    880,571    (52.4)%
Cash and cash equivalents at the beginnig of the year   4,063,131    2,995,118    35.7%   8,211,902    4,303,043    1,592,083    170.3%
Cash and cash equivalents at the end of the year   4,722,551    2,472,654    91.0%   4,063,131    4,722,551    2,472,654    91.0%

 

NOTES:

* Not audited, for illustration purposes only.

  

Dirección de Relacionamiento con el Inversionista Tel: 2345190, correo electrónico: investors@ecopetrol.com.co
www.ecopetrol.com.co

25 
 

 

 

Unaudited Cash Flow Statement

Ecopetrol Consolidated

 

COP$ million  3Q 2012 *   3Q 2011 *   ∆ (%)   2Q 2012 *   Jan-Sep 2012*   Jan-Sep 2011*   ∆ (%) 
Cash flow provided by operating activities:                                   
Net income   3,227,155    4,152,954    (22.3)%   3,657,140    11,158,238    11,014,573    1.3%
Adjustments to reconcile net income to cash provided by operating activities:                                   
Minority interest   163,234    -    100%    98,737    375,713    -    100% 
Depreciation, depletion and amortization   1,738,912    1,389,785    25.1%   1,823,454    5,146,127    4,578,912    12.4%
Net provisions   261,764    (6,933)   3,875.6%   115,315    505,673    (52,382)   1,065.4%
Disposal of property, plant and equipment   -    -    0.0%   -    -    -    0.0%
Loss for disposal of property, plant and equipment   13    1,921    (99.3)%   (36)   127    2,320    (94.5)%
Loss for disposal of natural and environmental resources   (3,412)   -    (100.0)%   -    3,490    -    100.0%
Loss for disposal of other assets   3,490    20    17,350.7%   -    78    288    (72.9)%
Income (loss) from equity method on affiliated companies   (15,224)   (8,675)   75.5%   (31,611)   (68,759)   (88,220)   22.1%
Net changes in operating assets and liabilities:                                   
Accounts and notes receivable   (954,023)   (1,256,620)   (24.1)%   (1,238,555)   (2,921,059)   (3,125,414)   6.5%
Inventories   78,077    (28,881)   370.3%   (130,480)   (320,274)   (411,419)   22.2%
Deferred and other assets   48,745    55,058    (11.5)%   (167,193)   180,555    (550,588)   132.8%
Accounts payable and related parties   (2,222,230)   (4,316)   51,388.2%   (16,347)   127,031    2,614,100    (95.1)%
Taxes payable   1,261,123    1,821,745    (30.8)%   (4,673,081)   (2,430,485)   2,262,971    (207.4)%
Labor obligations   39,681    47,036    (15.6)%   38,067    9,977    40,311    (75.2)%
Estimated liabilities and provisions   (434,251)   (344,467)   26.1%   (654,436)   (487,425)   252,426    (293.1)%
Cash provided by operating activities   3,193,053    5,818,627    (45.1)%   (1,179,026)   11,279,007    16,537,878    (31.8)%
                                    
Cash flows from investing activities:                                   
Payment for purchase of Companies, net of cash acquired   -    (55,809)   (100.0)%   -    -    (868,954)   100.0%
Purchase of investment securities   (1,159,485)   (71,606)   (1,519.3)%   (444,395)   (8,475,196)   (9,657,535)   12.2%
Redemption of investment securities   3,873,231    (879,199)   540.5%   4,700,983    11,048,488    7,769,130    42.2%
Sale of property, plant and equipment   -    -    0.0%   -    -    -    0.0%
Investment in natural and environmental resources   (1,198,543)   (1,026,393)   16.8%   (1,171,691)   (3,911,387)   (3,359,230)   16.4%
Additions to property, plant and equipment   (1,869,633)   (2,969,425)   37.0%   (2,136,508)   (5,154,355)   (7,225,287)   28.7%
Net cash used in investing activities   (354,430)   (5,002,432)   (92.9)%   948,389    (6,492,450)   (13,341,876)   51.3%
                                    
Cash flows financing activities:                                   
Minority interest   2,939    128,403    (97.7)%   (430)   (4,136)   734,381    (100.6)%
Financial obligations   1,855,686    (117,505)   1,679.2%   718,315    4,175,208    48,626    8,486.4%
Received from associates - capitalization   -    478,467    (100.0)%   -    -    478,494    (100.0)%
Dividends   (3,499,555)   (1,994,449)   75.5%   (4,919,777)   (8,386,790)   (3,915,703)   114.2%
Net cash used in financing activities   (1,640,930)   (1,505,084)   9.0%   (4,201,892)   (4,215,718)   (2,654,202)   58.8%
                                    
Net increase (decrease) in cash and cash equivalents   1,197,694    (688,889)   273.9%   (4,432,529)   570,839    541,800    5.4%
Cash and cash equivalents at the beginnig of the year   5,958,773    4,957,467    20.2%   10,391,302    6,585,628    3,726,778    76.7%
Cash and cash equivalents at the end of the year   7,156,467    4,268,578    67.7%   5,958,773    7,156,467    4,268,578    67.7%

 

Notes

* According to the Public Accounting Framework, Colombian companies only have the obligation to consolidate their financial statements the end of each fiscal year, therefore the quarterly figures in this report are not audited and they do not constitute a formal consolidation of Ecopetrol's financial statement, though they do adjust to the methodology defined for this purpose.

  

Dirección de Relacionamiento con el Inversionista Tel: 2345190, correo electrónico: investors@ecopetrol.com.co
www.ecopetrol.com.co

26 
 

  

 

Calculation and Reconciliation of EBITDA

 

Ecopetrol S.A.

 

COP$ Millions  3Q 2012 *   3Q 2011 *   ∆ (%)   2Q 2012*   Ene-Sep 2012*   Ene-Sep 2011*   ∆ (%) 
EBITDA CALCULATION                                   
Operating income   4,913,138    6,273,532    -21.7%   6,001,256    17,818,575    17,176,307    3.7%
Plus: Depreciations, depletions and amortizations   1,318,544    884,392    49.1%   1,055,347    3,588,999    3,388,731    5.9%
UNCONSOLIDATED EBITDA   6,231,682    7,157,924    -12.9%   7,056,603    21,407,574    20,565,038    4.1%
                                    
RECONCILIATION NET INCOME TO EBITDA                                   
Net Income   3,247,649    4,196,712    -22.6%   3,675,480    (3,212,712)   11,015,720    2.3%
Depreciations, depletions and amortizations   1,318,544    884,392    49.1%   1,055,347    3,472,364    3,388,731    5.9%
Financial income   (646,260)   (1,295,202)   -50.1%   (1,307,117)   (500,188)   (3,463,650)   -7.2%
Financial expenses   647,315    1,366,266    -52.6%   1,334,968    2,126,679    4,155,420    -16.4%
Non financial income   (127,009)   (288,424)   -56.0%   (122,647)   (500,188)   (748,345)   -33.2%
Non financial expenses   641,488    365,940    75.3%   531,454    2,126,679    1,474,378    44.2%
Results in subsidiaries   (311,150)   (134,341)   131.6%   33,348    (721,765)   (573,179)   25.9%
Provision for income tax   1,461,105    2,062,581    -29.2%   1,855,770    5,388,017    5,315,963    1.4%
UNCONSOLIDATED EBITDA   6,231,682    7,157,924    -12.9%   7,056,603    21,407,574    20,565,038    4.1%

  

Ecopetrol Consolidated

 

COP$ Millions  3Q 2012 *   3Q 2011 *   ∆ (%)   2Q 2012*   Ene-Sep 2012*   Ene-Sep 2011*   ∆ (%) 
EBITDA CALCULATION                                   
Operating income   5,551,182    6,689,032    -17.0%   6,185,059    19,250,275    18,445,830    4.4%
Plus: Depreciations, depletions and amortizations   1,583,182    1,180,633    34.1%   1,481,535    4,564,505    4,277,688    6.7%
Minority interest   (219,764)   (176,370)   24.6%   (210,316)   (664,667)   (505,147)   31.6%
CONSOLIDATED EBITDA   6,914,600    7,693,295    -10.1%   7,456,278    23,150,113    22,218,370    4.2%
                                    
RECONCILIATION NET INCOME TO EBITDA                                   
Net income   3,227,155    4,152,955    -22.3%   3,657,141    11,158,238    11,014,573    1.3%
Depreciations, depletions and amortizations   1,583,182    1,180,633    34.1%   1,505,722    4,564,505    4,277,688    6.7%
Financial income   (20,724)   (4,191,433)   -99.5%   (1,980,444)   (3,913,870)   (6,668,981)   -41.3%
Financial expenses   70,282    4,348,811    -98.4%   2,086,743    4,197,258    7,441,897    -43.6%
Non financial income   (170,477)   (282,011)   -39.5%   (267,950)   (644,570)   (782,391)   -17.6%
Non financial expenses   686,231    392,556    74.8%   556,714    2,226,937    1,604,579    38.8%
Minority interest on net income   163,234    76,485    113.4%   98,737    375,713    120,163    212.7%
Provision for income taxes   1,595,481    2,191,670    -27.2%   2,009,931    5,850,569    5,715,990    2.4%
Minority interest on Ebitda   (219,764)   (176,370)   24.6%   (210,316)   (664,667)   (505,147)   31.6%
CONSOLIDATED EBITDA   6,914,600    7,693,295    -10.1%   7,456,278    23,150,113    22,218,370    4.2%

  

* Not audited, for illustration purposes only

  

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VII. Exhibits: Subsidiaries results

 

Note: The financial statements of subsidiaries are not audited.

 

Exploration and Production

 

1.Hocol

 

Income Statement

(COP$ Billion)  3Q 2012   3Q 2011   Jan-Sep
2012		   Jan-Sep
2011		 
Local Sales   0.6    3.3    3.3    6.2 
Export Sales   906.3    905.9    2,912.2    2,694.4 
Total Sales   906.9    909.2    2,915.5    2,700.6 
Variable Costs   569.8    574.5    1,921.3    1,670.4 
Fixed Costs   102.8    117.9    315.7    322.8 
Cost of Sales   672.6    692.4    2,237.0    1,993.1 
Gross profit   234.3    216.8    678.5    707.4 
Operating Expenses   54.5    54.6    168.6    110.3 
Operating Profit   179.8    162.2    509.9    597.1 
Profit/(Loss) before taxes   183.0    171.5    546.0    634.3 
Income tax   60.2    57.2    160.4    207.2 
Net Income/Loss   122.8    114.3    385.6    427.1 
                     
TOTAL EBITDA *   222.2    243.1    703.5    820.4 
EBITDA margin   25%   27%   24%   30%
EBITDA to EC GROUP**   222.2    243.1    703.5    820.4 

 

* Total EBITDA of the company under COLGAAP

**EBITDA (COLGAAP) contribution to EC group

 

Balance Sheet    
(COP$ Billion)  As of
September 30,
2012		   As of June 30,
2012		 
Current Assets   996.3    1,059.9 
Long Term Assets   1,711.2    1,628.5 
Total Assets   2,707.5    2,688.4 
Current Liabilities   674.1    485.0 
Long Term Liabilities   153.6    148.6 
Deferred taxes   -    - 
Total Liabilities   827.7    633.6 
Equity   1,879.8    2,054.8 
Total Liabilities and Shareholders´ Equity   2,707.5    2,688.4 

  

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2.Savia Peru

 

Income Statement                
                 
US$ million  3Q 2012   3Q 2011   Jan-Sep 2012   Jan-Sep 2011 
Local Sales   111.7    107.8    351.9    308.6 
Export Sales   -    -    -    - 
Sales of services   -    (5.6)   -    - 
Total Sales   111.7    102.2    351.9    308.6 
Variable Costs   28.6    24.4    86.7    108.9 
Fixed Costs   33.4    13.6    90.0    40.0 
Cost of Sales   62.0    38.1    176.7    148.9 
Gross profit   49.6    64.1    175.2    159.7 
Operating Expenses   17.5    29.5    52.9    54.5 
Operating Profit   32.1    34.6    122.3    105.2 
Profit/(Loss) before taxes   32.1    34.6    122.3    105.2 
Income tax   9.9    3.8    34.4    14.6 
Employee profit sharing   -    -    -    - 
Deferred taxes   1.4    12.9    4.7    20.9 
Minority interest   -    -    -    - 
Net Income/Loss   20.8    17.9    83.3    69.8 
                     
TOTAL EBITDA *   56.7    49.5    202.5    143.0 
EBITDA margin   51%   48%   58%   46%
EBITDA to EC GROUP***   -    -    -    - 

  

* Total EBITDA of the company under COLGAAP

**EBITDA (COLGAAP) contribution to EC group

 

Balance Sheet        
   As of    
   September 30,   As of June 
US$ million  2012   30, 2012 
Current Assets   226.9    233.6 
Long Term Assets   641.5    604.5 
Total Assets   868.5    838.1 
Current Liabilities   194.0    173.9 
Long Term Liabilities   145.5    156.0 
Deferred taxes   -    - 
Total Liabilities   339.5    329.9 
Equity   529.0    508.2 
Total Liabilities and Shareholders´   868.5    838.1 

  

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3.Equión

 

Income Statement                
                 
(COP$ Billion)  32Q 2012   3Q 2011   Jan-Sep 2012   Jan-Sep 2011 
Local Sales   47.0    43.3    148.6    96.9 
Export Sales   539.1    431.8    1,511.0    1,295.5 
Sales of services   -    1.0    -    2.6 
Total Sales   586.1    476.1    1,659.6    1,395.0 
Variable Costs   268.8    256.2    658.1    704.6 
Fixed Costs   47.9    34.8    120.9    88.1 
Cost of Sales   316.7    291.0    779.0    792.7 
Gross profit   269.4    185.1    880.6    602.2 
Operating Expenses   14.3    22.1    46.9    147.3 
Operating Profit   255.1    163.0    833.7    455.0 
Profit/(Loss) before taxes   268.5    151.4    887.0    334.9 
Income tax   66.0    63.9    283.6    174.6 
Net Income/Loss   202.5    87.5    603.4    160.3 
                     
TOTAL EBITDA *   321.0    198.0    1,020.7    548.3 
EBITDA margin   55%   42%   62%   39%
EBITDA to EC GROUP**   163.8    101.0    520.6    279.6 

 

* Total EBITDA of the company under COLGAAP

**EBITDA (COLGAAP) contribution to EC group

 

Balance Sheet        
   As of September   As of June 30, 
(COP$ Billion)  30, 2012   2012 
Current Assets   1,491.4    1,217.1 
Long Term Assets   2,313.6    2,246.1 
Total Assets   3,805.0    3,463.2 
Current Liabilities   812.3    658.0 
Long Term Liabilities   181.3    202.3 
Total Liabilities   993.6    860.3 
Equity   2,811.4    2,602.9 
Total Liabilities and Shareholders´ Equity   3,805.0    3,463.2 

   

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Refining and Petrochemical

 

1)Propilco

 

Sales volume (tons)  3Q 2012   3Q 2011   Jan-Sep 2012   Jan-Sep 2011 
Polypropylene   113,342    95,591    306,003    283,061 
Polypropylene marketing for COMAI   2,562    3,549    7,946    8,622 
Polyethylene marketing   3,576    -    9,021    - 
Total   119,480    99,140    322,969    291,684 

 

Income Statement                
(COP$ Billion)  3Q 2012   3Q 2011   Jan-Sep 2012   Jan-Sep 2011 
Local Sales   152.5    189.4    473.2    551.5 
Export Sales   196.7    190.7    559.3    591.8 
Total Sales   349.2    380.2    1,032.5    1,143.3 
Variable Costs   277.0    326.5    845.2    959.5 
Fixed Costs   28.3    26.5    82.6    78.6 
Cost of Sales   305.3    352.9    927.8    1,038.1 
Gross profit   43.9    27.2    104.7    105.2 
Operating Expenses   28.4    25.3    81.8    74.0 
Operating Profit   15.5    1.9    22.9    31.2 
Profit/(Loss) before taxes   22.4    8.0    36.5    34.9 
Income tax   (1.1)   1.2    (2.0)   4.9 
Minority interest   -    -    -    - 
Net Income/Loss   23.5    6.8    38.5    30.0 
                     
TOTAL EBITDA *   29.30    14.68    61.90    69.53 
EBITDA margin   8%   4%   6%   6%
EBITDA to EC GROUP**   29.3    14.7    61.9    69.5 

 

* Total EBITDA of the company under COLGAAP

**EBITDA (COLGAAP) contribution to EC group

 

Balance Sheet        
   As of     
   September 30,   As of June 30, 
COP$ Billion  2012   2012 
Current Assets   640.0    663.7 
Long Term Assets   505.1    508.0 
Total Assets   1,145.1    1,171.7 
Current Liabilities   362.5    401.5 
Long Term Liabilities   115.3    126.6 
Total Liabilities   477.8    528.1 
Equity   667.3    643.6 
Total Liabilities and Shareholders´ Equity   1,145.1    1,171.7 

   

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2.Reficar

 

Sales Volume (MBD)  3Q 2012   3Q 2011   Jan-Sep 2012   Jan-Sep 2011 
Local   47.2    43.4    45.6    42.2 
International   51.7    57.1    52.0    55.4 
Total   98.9    100.5    97.6    97.6 

 

Income Statement                
(COP$ Billion)  3Q 2012**   3Q 2011**   Ene-Sep 2012   Ene-Sep 2011 
Local Sales   920.8    871.3    2,486.2    2,292.3 
Export Sales   835.0    1,060.0    2,567.9    2,758.9 
Total Sales   1,755.8    1,931.2    5,054.1    5,051.2 
Variable Costs   1,672.4    1,820.0    4,981.3    4,729.8 
Fixed Costs   70.5    61.2    197.6    169.9 
Cost of Sales   1,742.9    1,881.2    5,178.9    4,899.7 
Gross profit   12.9    50.0    (124.8)   151.5 
Operating Expenses   16.4    28.6    96.7    100.5 
Operating Profit   (3.5)   21.4    (221.5)   51.0 
Non Operating income   46.3    46.0    339.0    137.6 
Non Operating expenses   (53.4)   (38.5)   (178.0)   (143.2)
Profit/(Loss) before taxes   (10.6)   28.9    (60.5)   45.4 
Income tax   1.1    1.3    3.0    3.5 
Minority interest   -    -    -    - 
Net Income/Loss   (11.7)   27.6    (63.5)   42.0 
                     
TOTAL EBITDA *   (22.10)   50.82    (161.60)   137.07 
EBITDA margin   -0.7%   1.4%   -1.3%   0.8%
EBITDA to EC GROUP***   (22.1)   50.8    (161.6)   137.1 

  

* Total EBITDA of the company under COLGAAP

** The quarter corresponds to June-August

**EBITDA (COLGAAP) contribution to EC group

 

Balance Sheet        
   As of August 31,   As of May 30, 
COP$ Billion  2012   2012 
Current Assets   1,653.3    1,528.9 
Long Term Assets   8,153.1    7,308.5 
Total Assets   9,806.4    8,837.4 
Current Liabilities   1,487.5    1,472.0 
Long Term Liabilities   5,823.1    4,856.6 
Total Liabilities   7,310.6    6,328.6 
Equity   2,495.8    2,508.8 
Total Liabilities and Shareholders´ Equity   9,806.4    8,837.4 

   

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Transport

 

1. Ocensa

 

Transported volumes (thousand
barrels per day)		  3Q 2012   3Q 2011   Jan-Sep 2012   Jan-Sep 2011 
Cusiana-Porvenir   158.2    174.9    163.8    144.4 
Porvenir-Vasconia   558.5    574.8    583.4    554.9 
Vasconia-Coveñas   383.0    379.0    400.3    355.5 
Coveñas-Export Port   367.4    405.2    409.9    356.9 

 

Income Statement                
                 
(COP$ Billion)  3Q 2012   3Q 2011   Jan-Sep 2012   Jan-Sep 2011 
Sales of services   234.6    226.0    744.3    718.6 
Total Sales   234.6    226.0    744.3    718.6 
Cost of Sales   172.5    176.4    492.2    517.1 
Gross profit   62.1    49.6    252.1    201.4 
Operating Expenses   18.2    14.2    55.3    45.6 
Operating Profit   43.9    35.4    196.8    155.8 
Profit/(Loss) before taxes   30.6    62.6    71.2    96.5 
Income tax   4.2    1.3    6.9    4.0 
Minority interest   -    -    -    - 
Net Income/Loss   26.4    61.3    64.3    92.5 
                     
TOTAL EBITDA *   143.7    140.8    491.4    472.2 
EBITDA margin   61%   62%   66%   66%
EBITDA to EC GROUP**   121.8    84.5    416.7    283.3 

  

* Total EBITDA of the company under COLGAAP

**EBITDA (COLGAAP) contribution to EC group

 

Balance Sheet        
   As of     
   September 30,   As of June 30, 
COP$ Billion  2012   2012 
Current Assets   855.8    872.7 
Long Term Assets   3,588.2    3,657.6 
Total Assets   4,444.0    4,530.3 
Current Liabilities   321.8    330.3 
Long Term Liabilities   712.0    816.0 
Total Liabilities   1,033.8    1,146.3 
Equity   3,410.2    3,384.0 
Total Liabilities and Shareholders´ Equity   4,444.0    4,530.3 

   

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2. ODL

 

   3Q 2012   3Q 2011   Jan-Sep 2012   Jan-Sep 2011 
Transported volumes (thousand barrels per day)   205.7    213.9    215.9    203.9 

 

Income Statement                
           Jan-Sep   Jan-Sep 
(COP$ Billion)  3Q 2012   3Q 2011   2012   2011 
Sales of services   168.1    121.3    395.7    257.8 
Total Sales   168.1    121.3    395.7    257.8 
Variable Costs   18.0    16.1    51.9    40.2 
Fixed Costs   65.7    50.9    177.4    118.5 
Cost of Sales   83.7    67.0    229.3    158.6 
Gross profit   84.4    54.3    166.4    99.2 
Operating Expenses   5.0    3.7    14.5    10.2 
Operating Profit   79.4    50.6    151.9    88.9 
Profit/(Loss) before taxes   166.2    53.6    198.3    72.3 
Income tax   1.6    1.1    5.1    3.2 
Minority interest   -    -    -    - 
Net Income/Loss   164.6    52.5    193.2    69.1 
                     
TOTAL EBITDA *   109.3    69.1    246.5    147.6 
EBITDA margin   65%   57%   62%   57%
EBITDA to EC GROUP**   71.0    44.9    160.2    95.9 

  

* Total EBITDA of the company under COLGAAP

**EBITDA (COLGAAP) contribution to EC group

 

Balance Sheet        
   As of     
   September   As of June 30, 
COP$ Billion  30, 2012   2012 
Current Assets   310.50    315.10 
Long Term Assets   2,064.30    1,958.40 
Total Assets   2,374.80    2,273.50 
Current Liabilities   113.00    171.90 
Long Term Liabilities   1,391.00    1,395.30 
Total Liabilities   1,504.00    1,567.20 
Equity   870.80    706.30 
Total Liabilities and Shareholders´ Equity   2,374.8    2,273.50 

   

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Biofuels

 

Ecodiesel

 

Sales volume (thousand barrels equivalent per day)  3Q 2012   3Q 2011   Jan-Sep2012   Jan-Sep2011 
Biodiesel   0.044    0.042    0.043    0.038 
Glycerin   0.005    0.005    0.005    0.005 
Total   0.049    0.047    0.049    0.042 

 

Income Statement                
                 
(COP$ Billion)  3Q 2012   3Q 2011   Jan-Sep 2012   Jan-Sep 2011 
Domestic sales   119.5    75.8    254.8    219.2 
Sales of services   -    -    -    - 
Total Sales   119.5    75.8    254.8    219.2 
Variable Costs   103.3    71.0    219.8    203.1 
Fixed Costs   -    -    -    - 
Cost of Sales   103.3    71.0    219.8    203.1 
Gross profit   16.3    4.8    35.0    16.1 
Operating Expenses   2.7    3.0    17.2    10.0 
Operating Profit   13.6    1.8    17.9    6.0 
Profit/(Loss) before taxes   7.90    -4.20    12.20    - 
Income tax   0.1    -    0.1    - 
Minority interest   -    -    -    - 
Net Income   7.84    -4.20    12.14    0.00 
                     
TOTAL EBITDA *   (0.69)   5.55    15.54    9.80 
EBITDA margin   -1%   7%   6%   4%
EBITDA to EC GROUP***   -    -    -    - 

  

* Total EBITDA of the company under COLGAAP

**EBITDA (COLGAAP) contribution to EC group

 

Balance Sheet        
   As of     
   September     
COP$ Billion  30, 2012   As of May 30, 2012 
Current Assets   59.3    57.4 
Long Term Assets   82.1    76.6 
Total Assets   141.4    134.0 
Current Liabilities   53.6    112.0 
Long Term Liabilities   54.3    - 
Total Liabilities   107.9    111.96 
Equity   33.5    22.0 
Total Liabilities and Shareholders´ Equity   141.4    134.0 

  

Dirección de Relacionamiento con el Inversionista Tel: 2345190, correo electrónico: investors@ecopetrol.com.co
www.ecopetrol.com.co

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